Best-(Worst-)Case MEVil Response

Exploring an alternative to marketplace proposals for mitigating Miner Extractable Value (MEV) can potentially preserve Bitcoin's decentralization while offering protection against MEV. This alternative involves deploying a network of specialized software agents across the blockchain network. These agents are designed to collectively identify and neutralize MEV opportunities through three primary functions: monitoring, responding, and coordinating. Monitoring agents scan the network to detect potential MEV extraction patterns. Response agents then adjust transaction parameters dynamically to render the extraction unprofitable. Lastly, coordination protocols enable these agents to share information efficiently without creating central points of failure.

This agent-based approach to MEV mitigation draws on insights similar to those underpinning marketplace proposals. It acknowledges the necessity of visibility into transaction flow and the ability to sequence transactions for MEV extraction. However, it proposes addressing these requirements at the protocol layer instead of relying on intermediaries. In practice, this would mean that a user's wallet coordinates with a network of monitoring agents when submitting a transaction, especially one prone to frontrunning on decentralized exchanges (DEXs). These agents would analyze the mempool for MEV opportunities, devise optimal fee strategies, and adjust transaction timing and parameters accordingly. This system offers users MEV protection without necessitating trust in a centralized marketplace operator and promises to become more effective over time as agents learn and adapt to new extraction patterns.

When compared to marketplace-based approaches to MEV mitigation, the agent-based model boasts several advantages, including the preservation of decentralization and the elimination of the need to trust marketplace operators. It is also potentially more adaptable to emerging extraction techniques. Nonetheless, this approach presents challenges, such as its complex implementation and potentially slower deployment due to the required coordination among various agents.

The technical feasibility of this proposal hinges on integrating existing tools—such as mempool monitoring utilities, statistical analysis of transaction patterns, and dynamic fee estimation—into a cohesive system. The initial phase could focus on developing simple monitoring agents capable of identifying prevalent extraction patterns, with the system's capabilities expanding progressively as its effectiveness is proven.

The next steps involve drafting a more detailed specification for this approach, which could be implemented without consensus changes in the blockchain protocol, similarly to how marketplace models might operate externally. This prompts a discussion on whether the agent-based model merits exploration as either an alternative or a complement to the marketplace framework for MEV mitigation.